9th Feb 2023 14:36
(Alliance News) - First Abu Dhabi Bank PJSC might have to act quick on its reported plans to acquire Standard Chartered PLC in order to take advantage of the depreciation of the pound before a revival, research from Interactive Investor speculated on Thursday.
This was after Bloomberg on Thursday reported that First Abu Dhabi, otherwise known as FAB, were pressing ahead with a potential USD35 billion offer for StanChart, causing the London-based lender to surge to the top of the FTSE 100 on Thursday.
https://www.bloomberg.com/news/articles/2023-02-09/standard-chartered-is-still-in-play-with-fab-s-operation-foxtrot
Shares in StanChart were up 11% to 762.20 pence each in London on Thursday afternoon.
Bloomberg said FAB's proposed acquisition was still in play, after a move to put earlier takeover plans on hold "didn't halt its ambitions to become a global financial powerhouse".
"International businesses and investors have been looking towards the UK market over the last year as an attractive geography in the search for potential takeover targets, given the depreciation of the pound since the May 2021 peak and the corresponding increased attractiveness of sterling-priced valuations," said Interactive Investor analyst Victoria Scholar.
"[The Bloomberg report] is an extension of recent [mergers and acquisitions] speculation that has helped spur StanChart's outperformance over the last year."
Standard Chartered's market value is around USD24 billion, compared to FAB's USD43 billion, Bloomberg said, claiming the recent drop in the British pound adds to Standard Chartered's attractiveness, trading at just 0.56 times its book value.
Scholar continued: "The recent revival of the pound could spur investors to move quickly as valuations become richer again. StanChart shares are up 15% year-to-date and have rallied by more than 30% over a one-year period."
AJ Bell analyst Russ Mould saw StanChart's surging share performance on Thursday amid a wider successful trading for the FTSE 100.
"At the current rate, we could see the FTSE 100 break through the 8,000 level by early next week, which would represent a long-overdue victory for the UK stock market," he said.
On FAB's interest in StanChart, Mould added: "If successful, it would represent yet another UK stock acquired by a foreign player. It would also play to the theory that industry players are more likely to buy UK-listed companies than private equity in the current environment.
"Whereas the sharp rise in the cost of debt has made life harder for private equity to do leveraged deals, a lot of businesses have come out of the pandemic in a robust financial shape and have plenty of cash on their books to buy rivals in their respective sectors."
FAB officials are reportedly working under the radar on a possible bid, codenamed Silver-Foxtrot, once a cooling off period required by UK takeover rules elapses, according to Bloomberg sources. Wall Street veteran Ken Moelis is working closely with FAB executives, key members of Abu Dhabi’s ruling family and some of the emirate’s sovereign funds on a possible transaction, they added.
Any acquisition would be funded by backers including the Abu Dhabi sovereign fund Mubadala Investment Co and the emirate's ruling Al Nahyan family, said the Bloomberg sources.
Standard Chartered Chief Executive Officer Bill Winters recently told the World Economic Forum gathering in Davos, Switzerland in January that it was "quite logical" for Middle Eastern banks to be interested in buying European financial institutions, due to their relatively low valuations.
However, Winters added he did not think a deal with FAB was likely.
"This is not something we’ve either engaged with, or been interested in," said Winters in January. "The thing with Standard Chartered is we are doing very well all by ourselves. Everything is on track for us."
Bloomberg reporters Ambereen Choudhury, Jan-Henrik Foerster and Dinesh Nair said the proposed acquisition reflected keenness in Abu Dhabi to make use of the recent period of higher crude prices:
"Abu Dhabi is keen to use its oil windfall to transform the city’s financial sector, which has lagged many of its other key industries such as energy, tourism and logistics.
"Such an attempt would represent a step beyond the moves other wealthy Gulf nations have made to take minority stakes in firms like Barclays PLC and Credit Suisse Group AG."
Brent traded around USD84 per barrel on Thursday, falling by more than a quarter from its 2022 peak of above USD120 per barrel.
Boston University Professor and a former US Federal Reserve bank examiner Mark Williams added: "FAB and the royal family are simply responding to global finance trends and the swelling amounts of capital in the Middle East.
"The state's goal of acquiring a reputable multinational bank is also linked to a desire to gain greater legitimacy in global financial circles while strengthening control over the storage and movement of funds."
By Greg Rosenvinge, Alliance News reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
Standard CharteredBarclays